When a customer is behind in paying you, it can create an unhappy situation on both sides. No one wants to be making or receiving a call regarding late payment. By taking some steps toward more efficient invoicing, you may be able to improve both timeliness of payments and customer relations. To help speed payment, let customers pay by whatever method they prefer. Give them the option of using checks, electronic funds transfer, credit cards or debit cards. When possible, use ACH payments, which transfer funds electronically and can save you the time it takes to deposit checks. In particular, offering the convenience of paying online can make this task easier for customers.
One key component of small business success is cash flow - getting payments from your customers so that you have the money to pay your suppliers (and, hopefully, earn some profit for yourself). Of course, that's easier said than done. There are many things that can interfere with this pipeline, from impatient suppliers to unexpected disasters. An element of that pipeline that you can positively influence, though, is customer payments. A prompt payment from your customer gets cash flowing in much faster, enabling you to improve your cash flow and keep your business humming right along.
Whether you are collecting payment on a business transaction from a customer across the street or a client who is 12,000 miles away, learning how to collect payment on an overseas sales transaction is the single most critical yet insanely overlooked detail for small to medium sized business owners who aspire to do business internationally. Why? Because the excitement for sales folks typically lies in striking the deal - not in determining how you get paid.
Small business owners are finding answers to their questions - like "How can I get paid faster?" - on OPENForum.com. It's where they can meet, talk, and get answers from other business owners? and learn about business tools like AcceptPay, the new digital invoicing and payment solution.
AcceptPay offers you the ability to create, send, and even automate electronic invoices. It also enables you to accept various forms of payments - such as major credit cards, bank transfers, e-checks, and even cash - that can help make it easier for your customers to pay you. And because it's online, you can review accounts in real-time, giving you a clearer view of available cash.
Here's what top performers in terms of A/P practices now understand: If one wants to maximize cash management, one needs to optimize visibility and transparency, strengthen controls and enhance operational efficiencies around accounts payable - all without added expense. Achieving this objective successfully promises a rapid return on investment at a time when cash is critical to operations. It also elevates the finance executives who embrace these practices - underscoring their vital impact on company operations and performance. Today's best practice firms have actively considered the tradeoffs associated with insourcing, outsourcing and smartsourcing accounts payable. They've taken the steps necessary to strategically manage their cash and capital.
Successful businesses understand the Pareto Principle, also known as the "80/20 rule" or the "law of the vital few." Effective marketing organizations, for instance, have become experts at focusing their attention and resources on their most profitable customers. Yet when it comes to business operations in finance and accounting, most companies give little, if any, thought to this rule. In the case of Accounts Payable (AP), most businesses don't handle high-value invoices differently than routine payables - mainly because they don't recognize what invoices are high value or don't have a process to treat them with priority. Instead, the conventional thinking in payables processing is that an invoice is just an invoice, regardless of its possible impact on the bottom line.
Many companies today rely on "Post-transaction recovery" to audit, reconcile and recover mistaken vendor payments. However, this blunt-force, after-the-fact approach to invoice reconciliation is extraordinarily costly and wasteful. Due to process inadequacies in their Accounts Payable (AP) departments, they are cutting checks that are not owed, paying phantom bills and contributing to various forms of "Profit leakage." Indeed, they are missing prompt payment discounts, encouraging maverick spending and leaving themselves vulnerable to fraud. In some cases, they are creating an embarrassing image problem with their suppliers by handling their AP processes in an unprofessional manner. Most significantly, they are absorbing the opportunity costs of recovering their escaped capital.
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With the huge amounts of business transacted online, there is a growing concern amongst businesses about managing payments. Business to business (B2B) payments at the international level is a major concern since the amounts tend to be larger and the charges are appreciable. This results in some loss in profits, which makes global commerce less attractive. From the smallest business operating on the web to huge conglomerates that transfer large amounts of funds internationally, everyone wants cost efficiency in their payment system.
The receivables-based financing, which encompasses asset-based loans, factoring (in which a company actually sells its invoices), and related credit mechanisms, is no panacea. Pledging receivables and getting advances against them can cost 30% to 40% more than an unsecured bank line, for example. In addition, "The CFO enters a different world", one that often entails more-rigorous reporting on accounts receivable and collections while providing less flexibility in negotiating terms with customers. And, in some cases, the lender comes to have an iron grip on the company's cash flows. "It can result in a big loss of self-esteem and independence".
The ongoing economic crisis has created deep uncertainty about the future performance, and current value, of many businesses. One technique deal-makers may consider using to bridge disagreements between prospective buyers and sellers of businesses over valuation is the "Earn-out." With an earn-out, a portion of the purchase price is paid after the closing, contingent in whole or in part upon the target company's economic performance or achievement of non-economic milestones during the post-closing period. The earn-out may provide for the payment of a fixed amount of compensation upon the target's satisfaction of a specified performance criterion, or, more typically, a specified percentage of the amount by which the target's performance exceeds an agreed performance threshold.
The key to maximizing the success of any business, big or small, is to maximize the amount of cash coming in, while minimizing the amount going out. That means making sure you are collecting as much revenue from customers as you can, while saving every penny possible on purchases made from suppliers. For a big business, this maximize/minimize strategy can boost profits, for a small business it can mean the difference between success and bankruptcy. The best way to encourage prompt payment from the customers is to make payment as convenient as possible. That means offering them a variety of ways to pay. "Every customer is different," says Dave Bowman of TTG Consulting, a Los Angeles based consulting firm.
When most people think of the term embezzlement, what often comes to mind are unscrupulous money manager's at large corporations who take millions of dollars through scams and fraud? However, embezzlement can and does happen even at the smallest of firms. The employee that manages payroll and cuts them an extra paycheck, or the employee that manages accounts payable and makes a payment to a "Mystery firm", even the employee who handles petty cash and uses a few bucks without authorization to buy their lunch are all examples of embezzlement.
Cash fuel drives you in business just as jet fuel keeps a plane aloft. A pilot is very careful to accurately predict the fuel requirements. One should place the same importance on cash flow control because if, at any point in the future, one run out of fuel, like the pilot, one have got a BIG problem. In cash flow control, for each of a number of intervals of time, one make conservative estimates for ones future sources of cash (IN) and future expenditures (OUT).
